Investor Presentation • Mar 15, 2016
Investor Presentation
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By attending or reading this presentation, you acknowledge and agree to be bound by the following limitations and restrictions. This presentation has been prepared by Galp Energia, SGPS, S.A. ("Galp" or the "Company") and may be amended and supplemented, but may not be relied upon for the purposes of entering into any transaction. This presentation is strictly confidential, is being distributed to a limited range of persons solely for their own information and may not (i) be distributed to the media or disclosed to any other person in any jurisdiction, nor (ii) be reproduced in any form, in whole or in part, without the prior written consent of the Company.
Although the Company has taken reasonable care in preparing the information contained herein, no representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein or any other material discussed at the presentation. Neither the Company nor any of its affiliates, subsidiaries, shareholders, representatives, agents, employees or advisors shall have any liability whatsoever (including in negligence or otherwise) for any loss or liability howsoever arising from any use of this presentation or its contents or any other material discussed at the presentation or otherwise arising in connection with this presentation.
This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or otherwise acquire securities of the Company or any of its subsidiaries or affiliates in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever in any jurisdiction.
This presentation is made to and directed only at persons (i) who are outside the United Kingdom, (ii) having professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). This presentation must not be acted or relied on by persons who are not Relevant Persons.
Neither this presentation nor any copy of it, nor the information contained herein, in whole or in part, may be taken or transmitted into, or distributed, directly or indirectly in or to the United States. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. No securities of the Company have been registered under the United States Securities Act of 1933 or the securities laws of any state of the United States, and unless so registered may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements are statements other than in respect of historical facts. The words "believe", "expect", "anticipate", "intends", "estimate", "will", "may", "continue", "should" and similar expressions usually identify forward-looking statements. Forward-looking statements may include statements regarding: objectives, goals, strategies, outlook and growth prospects; future plans, events or performance and potential for future growth; liquidity, capital resources and capital expenditures; economic outlook and industry trends; energy demand and supply; developments of Galp's markets; the impact of regulatory initiatives; and the strength of Galp's competitors. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Although Galp believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and are beyond its control. No assurance, however, can be given that such expectations will prove to have been correct. Important factors that may lead to significant differences between the actual results and the statements of expectations about future events or results include the Company's business strategy, industry developments, financial market conditions, uncertainty of the results of future projects and operations, plans, objectives, expectations and intentions, among others. Such risks, uncertainties, contingencies and other important factors could cause the actual results of Galp or the industry to differ materially from those results expressed or implied in this presentation by such forward-looking statements.
Actual future results, including financial and operating performance; demand growth and energy mix; Galp's production growth and mix; the amount and mix of capital expenditures; future distributions; resource additions and recoveries; project plans, timing, costs, and capacities; efficiency gains; cost savings; integration benefits; product sales and mix; production rates; and the impact of technology could differ materially due to a number of factors. These include changes in oil or gas prices or other market conditions affecting the oil, gas, and petrochemical industries; reservoir performance; timely completion of development projects; war and other political or security disturbances; changes in law or government regulation, including environmental regulations and political sanctions; the outcome of commercial negotiations; the actions of competitors and customers; unexpected technological developments; general economic conditions, including the occurrence and duration of economic recessions; unforeseen technical difficulties; and other factors.
The information, opinions and forward-looking statements contained in this presentation speak only as at the date of this presentation, and are subject to change without notice. Galp and its respective representatives, agents, employees or advisors do not intend to, and expressly disclaim any duty, undertaking or obligation to, make or disseminate any supplement, amendment, update or revision to any of the information, opinions or forward-looking statements contained in this presentation to reflect any change in events, conditions or circumstances.
Capital Markets Day 2016
Downstream and gas optimisation
Upstream execution and value maximisation
Sustainable value creation
5
| 2015 target | 2015 actual | ||
|---|---|---|---|
| Ebitda (€bn) |
1.1 - 1.3 |
1.56 | |
| Capex (€bn) |
1.3 - 1.5 |
1.28 | |
| Production growth |
30% to 35% | 50% | |
| NG/LNG sales (bcm) | 5 - 7 |
7.7 | |
| (€m)1 R&M efficiency |
100 (@2019) | 80 | |
1€100m R&M efficiency refers to annual savings by 2019 vs. 2013.
2014 vs. 2015 Ebitda (€m)
Source: Bloomberg and Platts. Note: MSCI, refers to MSCI world index, last 12 months as of March 10.
Commodities prices (100 base = Jan 2000) Global energy demand mix (bntoe)
Capital Markets Day | 15 March 2016
10
Focus on delivery and profitability
Unlock more value from current portfolio
Screening new opportunities and portfolio management
Integrated energy player
Upstream execution and value maximisation
Sustainable value creation
NG and LNG portfolio breakdown (bcm)
14
Integrated energy player
Downstream and gas optimisation
Upstream execution and value maximisation
Sustainable value creation
2P reserves and 2C resources (mmboe)
2P+2C of 2,050 mmboe at YE 2015
Note: Net entitlement reserves and working interest resources. Source: All figures are based on DeGolyer and MacNaughton report as of 31.12.2015.
kboepd 2015 exit production 50
kboepd Well produtivity
FPSOs producing by 6 YE 2016
Further cost optimisation
Continue to renegotiate supply chain contracts
Extend life of licenses
Maximise value creation
Regional focus targeting oil & gas
Leverage hub potential
Disciplined E&A spending
Annual average working interest production (kboepd)
2015-20 CAGR 25-30% Execute
Operating & sanctioned Lula/Iracema, Iara, B32, B14/14k
Further upside in 2020+
Feed project funnel
Integrated energy player
Downstream and gas optimisation
Upstream execution and value maximisation
Sustainable value creation
Galp DPS (€/share)
Business plan assumes €0.50/sh flat from 2017
Technology & partnerships HSE People
Develop unique capabilities
Safety at the core of our operations
Performance driven culture
| Competitive position |
Unique growth profile |
Financial discipline |
|||
|---|---|---|---|---|---|
| <\$30/bbl | Projects breakeven |
25-30% | Production CAGR 2015-20 |
15% | Capex reduction |
| Resilient | Integrated profile |
≈15% | Ebitda CAGR 2015-20 |
≈1.0x | Net debt/ Ebitda@2020 |
| FCF>0 | During 2018 @\$55/bbl |
≈15% | ROACE @2020 |
Commitment | to shareholder remuneration |
Capital Markets Day 2016
Execute: Deliver world-class projects Extract: Develop upside opportunities Explore: Secure resource addition Concluding remarks Appendix
29
Upstream focused strategy
Extract: Develop upside opportunities
Explore: Secure resource addition
Concluding remarks
Appendix
2P NE reserves (mmboe)
1Kuito FPSO decommissioned during 2013.
| 2016 | 2017 | 2018 | 2019 | 2020 | 2020+ | |
|---|---|---|---|---|---|---|
| Lula Central Leased FPSO 150 kbopd |
Lula South Replicant FPSO 150 kbopd |
Lula North Replicant FPSO 150 kbopd |
Sépia Leased FPSO |
Lula West | ||
| a c ri e m |
Lula Ext South | Atapu South |
Atapu North Replicant FPSO 150 kbopd |
|||
| A h t u o |
Replicant FPSO 150 kbopd |
Replicant FPSO 150 kbopd |
Carcará | |||
| S | Berbigão/Sururu Replicant FPSO 150 kbopd |
Júpiter | ||||
| a c |
Kaombo North |
Kaombo South |
Coral | |||
| ri f A |
125 kbopd | 125 kbopd | Mamba | |||
| Capital Markets Day 15 March 2016 |
Topside modules manufactured in Brazil progressing according to schedule
Ramp-up period of Lula/Iracema FPSOs (#months)
FPSO #1 production (2010- 2020 in kbopd)
1Source: ANP Dec-15.
Implementation of cost reduction initiatives
Drilling campaign started and PSA fiscal terms renegotiated during 2015
Capital Markets Day | 15 March 2016
EPC proposals being evaluated
EPCIC contract under negotiation
43
Capital Markets Day | 15 March 2016
Upstream focused strategy
Execute: Deliver world-class projects
Explore: Secure resource addition
Concluding remarks
Appendix
Drilling and completion (#days)
Oil recovery factor (%)
Note: Galp view.
Process being tested and expected to improve ultimate recovery factor
4D seismic acquisition successfully completed in 2015 with results being evaluated
Subsea separation and subsea seawater treatment demonstrate significant potential
Adding new wells within the original well patterns to accelerate recovery
Upstream focused strategy
Execute: Deliver world-class projects
Extract: Develop upside opportunities
Concluding remarks
Appendix
Capital Markets Day | 15 March 2016
49
Main targets are Lower Cretaceous and Upper Jurassic sands
First operatorship in deepwaters
Upstream focused strategy
Execute: Deliver world-class projects
Extract: Develop upside opportunities
Explore: Secure resource addition
Appendix
51
Capital Markets Day | 15 March 2016
Upstream focused strategy
Execute: Deliver world-class projects
Extract: Develop upside opportunities
Explore: Secure resource addition
Concluding remarks
| Reserves | 2014 | 2015 | % Chg. |
|---|---|---|---|
| 1P | 232 | 276 | 19% |
| 2P | 638 | 701 | 10% |
| 3P | 833 | 960 | 15% |
| Contingent resources | 2014 | 2015 | % Chg. |
| 1C | 332 | 307 | (8%) |
| 2C | 1,672 | 1,343 | (20%) |
| 3C | 3,496 | 3,025 | (13%) |
| Exploration resources | 2014 | 2015 | % Chg. |
| Unrisked | 1,605 | 1,493 | (7%) |
| Risked | 217 | 226 | 4% |
1Exploration resources and contingent resources on a working interest basis. Reserves figures on a net entitlement basis. All figures are based on DeGolyer and MacNaughton report as of 31.12.2015.
Capital Markets Day 2016
Disciplined capital allocation
Profitable growth
Financial position
Concluding remarks
Appendix
Revised macro assumptions
Profitable growth
Financial position
Concluding remarks
Appendix
Capital Markets Day | 15 March 2016
Capital Markets Day | 15 March 2016
1E&A – Exploration & Appraisal. Note: E&P committed capex considers Lula/Iracema and Iara in Brazil, Block 32 and Block 14/14k in Angola, and 2016 E&A.
Revised macro assumptions
Disciplined capital allocation
Financial position
Concluding remarks
Appendix
1Technical costs based on group working interest production (excludes royalties, overheads and oil taxes).
Benchmark refining margin
2016 Group Ebitda expected at €1.2 - €1.3 bn
1Post interest, taxes and dividends and excluding Sinopec reimbursements.
Revised macro assumptions
Disciplined capital allocation
Profitable growth
Concluding remarks
Appendix
67
Maintaining diversified sources of funding and reducing average cost
Average maturity of 3 years
Capital Markets Day | 15 March 2016
1Liquidity as of December 2015, including cash of €1.1 bn, credit lines of €1.1 bn and loan to Sinopec of €0.7 bn. 2Assumes €0.41472 DPS, related to 2015 fiscal year, and €0.50 flat DPS from 2016 onwards. 3Ratio considers net debt plus Sinopec MLT Shareholder Loan to Petrogal Brasil minus loan to Sinopec.
Revised macro assumptions
Disciplined capital allocation
Profitable growth
Financial position
Concluding remarks
Appendix
Revised macro assumptions
Disciplined capital allocation
Profitable growth
Financial position
Concluding remarks
Appendix
72
| Galp assumptions | 2016E | 2017E | 2018E | 2019E | 2020E |
|---|---|---|---|---|---|
| Brent price (\$/bbl) | 35 | 45 | 55 | 65 | 70 |
| Refining margin benchmark1 | 3.6 | 3.3 | 2.9 | 2.6 | 2.5 |
| EUR:USD | 1.12 | 1.12 | 1.12 | 1.12 | 1.12 |
| Ebitda sensitivities | Change | 2016E | 2020E |
|---|---|---|---|
| Brent price | \$5.0/bbl | €90 m | €210 m |
| Refining margin benchmark1 | \$1.0/bbl | €90 m | €95 m |
| EUR:USD | 0.05 | (€45 m) | (€115 m) |
1Benchmark refining margin = 42.5% cracking margin + 45.0% hydrocracking margin + 5.5% aromatics margin + 7.0% base oils margin.
| 2014 | 2015 | |
|---|---|---|
| Gross debt | €3.7 bn | €3.6 bn |
| Cash and equivalents | €1.1 bn | €1.1 bn |
| Net Debt | €2.5 bn | €2.4 bn |
| Net Debt considering loan to Sinopec as cash | €1.6 bn |
€1.7 bn |
| Net Debt to Ebitda Ratio1 | 1.2x | 1.2x |
| Available credit lines | €1.2 bn | €1.1 bn |
| Average life of debt | 3.7 | 3.1 |
| Average interest rate | 4.21% | 3.75% |
| % Debt @ floating rate | 57% | 58% |
Capital Markets Day 2016
| # | Number | CMD | Capital Markets Day | m | Millions |
|---|---|---|---|---|---|
| \$ (or USD) | Dollars | CMR | Cidade de Maricá | MLT | Medium long-term |
| % | Percentage | CO2 | Carbon dioxide | mmbbl | Million barrels |
| & | And | COO | Chief Operating Officer | mmboe | Million barrels of oil equivalent |
| @ | At | COOEC | China Offshore Oil Engineering Co., Ltd | mmboepd | Million barrels of oil equivalent per day |
| € (or EUR) |
Euros | COSCO | China Ocean Shipping Company | MSCI | Morgan Stanley Capital International |
| ≈ | Approximately | CPT | Compliant Piled Tower | mton | Million tonnes |
| x | Times | CPY | Cidade de Paraty | mtpa | Million tonnes per annum |
| 1C; 2C; 3C | Contingent resources | D&C | Drilling and Completion | NBP | National Balancing Point |
| 1P | Proved reserves | D&G | Downstream and Gas | NE | Net entitlement |
| 2P | Proved and probable reserves | DD&A | Depreciation, Depletion and Amortisation | NG | Natural Gas |
| 3P | Proved, probable and possible reserves | DoC | Declaration of Commerciality | NPV | Net Present Value |
| 3D | Three dimensional | DPS | Dividend per share | NWE | Northwest Europe |
| 4D | Four dimensional | DST | Drill stem test | Opex | Operational expenditure |
| ANP | Agency of Petroleum, Natural Gas and Biofuels | E | Expected | p.a. | Per annum |
| bbl | Barrel | E&A | Exploration and Appraisal | p.p. | Percentage points |
| BBLT | Benguela, Belize, Lobito and Tomboco | E&P | Exploration and Production | PoD | Plan of Development |
| bcm | Billion cubic metres | Ebitda | Earnings before interest and taxes, depreciation and amortisation | PPSA | Pré-Sal Petróleo S.A. |
| BJC | BJC Heavy Industries Public Company Limited | EPCIC | Engineering Procurement Construction Installation Commissioning | Q&A | Questions and Answers |
| bn | Billion | excl. | Excluding | R&D | Research and Development |
| bntoe | Billion tonnes of oil equivalent | FCF | Free Cash Flow | R&M | Refining and Marketing |
| BoD | Board of Directors | FLNG | Floating Liquefied Natural Gas | ROACE | Return on Average Capital Employed |
| boe | Barrel of oil equivalent | FPSO | Floating Production Storage Offloading | RRR | Reserve Replacement Ratio |
| c. | Circa | G&P | Gas and Power | sh | Share |
| CAGR | Compound Annual Growth Rate | HSE | Health, Safety and Environment | SXEP | STOXX Europe 600 Oil & Gas Index |
| Capex | Capital expenditure | IEA | International Energy Agency | Tcf | Trillion cubic feet |
| CAR | Cidade de Angra dos Reis | IOGP | International Association of Oil & Gas Producers | TL | Tômbua-Lândana |
| CDP | Carbon Disclosure Project | kboepd | Thousand barrels of oil equivalent per day | ToR | Transfer of Rights |
| CEO | Chief Executive Officer | kbopd | Thousand barrels of oil per day | USA | United States of America |
| CFO | Chief Financial Officer | km | Kilometre | vs. | Versus |
| CFFO | Cash flow from operations | LatAm | Latin America | WAG | Water Alternating Gas |
| Chg. | Change | LNG | Liquefied Natural Gas | WI | Working interest |
| CIT | Cidade de Itaguaí | LT | Long-term | YE | Year end |
| CMB | Cidade de Mangaratiba | LTIF | Lost Time Injury Frequency | YoY | Year over Year |
Over 25 years of experience in different industries, including oil & gas, energy and beverages. Member of Board of Directors of Galp since 2007
Chief Executive Officer Carlos Gomes da Silva
Chief Financial Officer
Filipe Silva
Former CEO of Deutsche Bank in Portugal
COO Exploration & Production
Thore E.Kristiansen
Held positions as Senior Vice President of Statoil for South America and was also Chairman of Statoil Brasil
COO Supply, Refining & Planning
Carlos Silva
Professional career in the area of procurement and engineering at Galp
COO Iberian Oil Marketing & International Oil
Tiago Câmara Pestana
Former CEO of Dia Portugal, which operates 640 stores in mainland Portugal
COO Gas & Power
Pedro Ricardo
Over 20 years of experience in the Gas sector. Previously responsible for supply and trading of natural gas
Chief Corporate Officer / New Energies
Carlos Costa Pina
Former Secretary of State for Treasury and Finance and member of the BoD of the Portuguese Securities Market Commission
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